Investors with medium-term perspective can consider buying the stock of Castrol India (Rs 543.6). The stock has been on a long-term uptrend since its 2008 trough formed around Rs 115.

It took support in the base band between Rs 380 and Rs 400 in February 2011 and December 2011 and resumed its long-term uptrend.

Since last December, the stock has been on an intermediate-term uptrend. Following a corrective decline in April and May 2012, the stock found support at around Rs 480 and continued its primary uptrend.

The stocks 200-day moving average also provided support around Rs 480 in early June. Short-term trend is also up for the stock.

In the previous week the stock surged 6.5 per cent strengthening its uptrend. It is trading well above its 50 and 200-day moving averages.

We notice that there is an increase in volumes over the past three trading sessions. The daily relative strength index is featuring in the bullish zone and weekly RSI has entered this zone. Further, monthly RSI has re-entered in to the bullish zone from the neutral region.

The daily moving average convergence divergence indicator is moving higher in line with the stock price and is hovering in the positive territory implying upward momentum. Both daily as well as weekly price rate of change indicator are hovering in the positive terrain implying buying interest. Our medium-term outlook on the stock is bullish.

We believe that Castrol has the potential of rallying and reaches our price target of Rs 600, with small sideways movement at around Rs 576 in the medium-term. Investors with medium-term perspective can consider buying the stock with stop-loss at Rs 510.

Follow up – Dhampur Sugar Mills (Rs 50.2)

The stock moved sideway and closed almost same levels in the previous week.

We reaffirm our bullish medium-term outlook on the stock, with price target and stop-loss mentioned last week.

(This recommendation is based on technical analysis. There is a risk of loss in trading.)

(This article was published on July 1, 2012)
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